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Excl: Formby’s letter to MSPs clarifies Dugdale case and commitment

A letter written by Labour general secretary Jennie Formby to the Chair of the Scottish Parliamentary Party and circulated to all MSPs and members of Labour’s Scottish Executive Committee and obtained by the SKWAWKBOX from a recipient lays out clearly the extent of Labour’s commitment to former Scottish leader Kezia Dugdale and the party’s actions to fulfil that commitment.

Ms Dugdale has featured in the media recently to claim that the party had dropped a commitment to fund her defence in a libel action brought by the owner of the Wings over Scotland website for a column in the Record newspaper, but Ms Formby paints a different picture to MSPs, who are understood to have written to her in support of Ms Dugdale:

The letter makes clear that:

The newspaper had offered to fund the case before Labour was involved

Labour’s commitment was for initial funding with a view to achieving an early settlement – and this commitment was fulfilled

that Ms Dugdale has not contacted Formby about further funding or to offer thanks for the support provided so far and has not provided evidence of any commitment by the party to go further

In addition, Formby expresses her mystification as to why previous general secretary Iain McNicol would have rejected an offer from the Record to fund the case when the article that led to the libel case resulted from the paper’s private agreement with Ms Dugdale to write it. She also clearly feels, to judge by the closing paragraph, that the raising of this issue is a distraction from the party’s mission in Scotland.

Kezia Dugdale has been contacted for comment.

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This is very questionable. The express financial authority granted to the NEC is extremely oblique in the rules but the nearest is in Chap 1, Clause VIII, 3, K:

“to organise and maintain such fund or funds as may be thought necessary for any or all of the objects for which the Party exists.”

Those objects are detailed in Chapter 1, Clause I. It seems to me it is extremely doubtful that funding Kezia Dugdale’s legal costs falls within this sub section. In what sense was it necessary for the objects for which the Party exists?

It is not required to have an express provision in the rules to provide for payment of legal expenses out of the mutual funds of the unincorporated association. They can be used to pay the legal fees due to claims made by or against officers or employees where it can be established that the association has a legitimate interest in the action, otherwise it may amount to unlawful maintenance. Hickman v The Kent or Romney Marsh Sheepbreeders Association (1920) 36 TLR 528 (KBD), and directly on point in Oram v Hutt [1914] 1 C 98 (CA) 103 it was held that an association has no common interest in an action for slander.

Considering that the defamation was contained in a column in the Record Newspaper that was part of a private agreement between Kezia Dugdale and the Newspaper and was neither directly related to her position in Labour nor arguably ancillary to her Labour Party role and this is in fact confirmed in the letter from Jennie Formby who states in para #5:

“…the column in question was written as part of a private arrangement between Kezia and The Record, and not in her capacity as Leader of Scottish Labour. The party had no involvement with the column and no oversight of the content so could not in any way be responsible for any consequences of comments made in the column.”

it is my initial opinion that the Labour Party had no legitimate interest in the action and the expenditure may amount to unlawful maintenance and/or an ultra vires misapplication of funds.

In an unincorporated association ultimate responsibility for the management and allocation of funds falls to the governing committee. In the Labour Party this is the NEC. The Party funds themselves do not belong to the Labour Party it is the members funds that are held in trust by the NEC. The NEC is ultimately therefore responsible for and accountable to the members for all expenditures and must act within the objects, rules and proper authority of the association. If the NEC, either itself, or through an agent acting with delegated authority acts outside of this it would be ultra vires expenditure and they can be held accountable, or even personally liable, to the membership for any resulting expenditures from the association’s funds. Burn v National Amalgamated Labourers Union of Great Britain and Ireland [1920] 2 Ch 364 (Ch), Bennett v National Amalgamated Society of Operative House and Ship Painters and Decorators (1915) 31 Times LR 203 (Ch).

1. A decision made by someone unknown to commit to initially fund Kezia Dugdale’s legal costs.

2. A decision made, following the initial hearing, by Jennie Formby to further fund Counsels opinion.

Regardless of who made the decisions they would have been made under the delegated authority of the NEC. These powers can be delegated by the NEC to the GS or onward by the GS under Chapter 1,VIII, 5 or VII,1, C to the NEC’s elected officers, committees, sub-committees, the General Secretary and other national and regional officials and designated representatives appointed by the NEC or the General Secretary.

In consequence therefore if this expenditure on Kezia Dugdale’s legal costs was indeed ultra vires and thus unlawful the members are entitled to seek recovery from the individuals who were members of the NEC at the time the financial decisions were made. Any Party member or even prior member who was a member at the time of the decisions would in my view have standing to take action through the Courts to recover the expenditure from the relevant individual NEC members. The alternative might be for the Party to attempt to claw back the expenditure from Kezia Dugdale herself.

Whichever way this is examined the sizeable expenditure cannot be properly justified and something must be done to seek recovery, whether through action by the NEC or in the alternative an ordinary Party member beginning litigation in the Courts.

Eric Joyce has argued that the party wouldn’t want her to owe her survival to the paper since a newspaper inevitably would want some dirt in return. Of course the party has now cut her adrift. The Record has stepped back in on what looks very much like a losing case. Dugdale now has no support from the party and again, will owe something to a newspaper. The Labour Party in Scotland should be very afraid. It really couldn’t happen to a more deserving bunch.

It makes one wonder what else will emerge, it is worth noting that all McNicol’s acolytes quickly resigned when he was ousted. It makes one wonder whether they were ever there to serve the Labour Party.

She should have apologised. The remark was not homophobic and she will loose the case and be charged with Stu Campbell’s costs as well as her own. This will bankrupt her and put her out of Parliament as a consequence.